Student Loans or Credit Card Debt: What Should You Pay Off First?

So you’re managing credit card balances. You’re also paying down student loans.

Money’s tight. Stress is high.

And you’re stuck on one big question:

Which debt should I pay off first?

Let’s cut through the noise and provide you with a strategy that saves money, frees up your income, and helps you regain financial control.

Start With the Facts: Credit Cards vs. Student Loans

Not all debt is created equal. Here’s how these two types compare.

Credit Card Debt

Average interest rate: 22.72% (as of June 2025).
Interest compounds daily.
No structured end date.
High balances damage your credit score.
Missed payments are reported after 30 days.

Student Loans

Undergraduate federal rate: 6.39% (as of June 2025).
Graduate federal rate: 7.94% (as of June 2025).
Repayment terms are structured.
Payment flexibility includes deferment and income-driven options.
Missed payments reported after 90 days.
Default after 270 days triggers wage garnishment and tax refund seizure.

At a glance, credit card debt appears to be more expensive and aggressive in terms of interest compounding. While student loans move more slowly, ignoring them still has consequences.

Which Debt Costs You More?

If you owe:

$5,000 in credit card debt at 22.72%
$30,000 in student loans at 6.39%

Annual interest costs:

Credit card: $5,000 × 22.72% = $1,136 per year
Student loan: $30,000 × 6.39% = $1,917 per year

But here’s the key difference: compound frequency and payment structure matter enormously.

Credit card reality:

Interest compounds daily (effective annual rate: ~25.5%)
Minimum payments (typically 2-3% of balance) barely cover interest
With minimum payments only, you’d pay approximately $1,200+ annually and the balance would barely decrease

Student loan reality:

Interest compounds annually or monthly depending on loan type
Fixed payment schedule designed to pay off the loan
Standard 10-year repayment would be about $334/month ($4,008 annually), but $1,917 goes to interest and $2,091 reduces principal

The bottom line: Even though the student loan accrues more total interest dollars, the credit card traps you in a cycle where you’re paying similar amounts but making no progress on the principal balance.

What Happens If You Ignore Credit Cards?

Credit cards impacts hit hard and fast:

When you hold a balance, your credit utilization increases, which can hurt your score.
Miss a payment? You’ll hear from collectors in weeks.
Minimum payments barely touch the actual balance.
Interest piles up daily.

Most people with credit card debt pay more in interest annually than they do on their student loans, even when the credit card balance is smaller.

It’s a compounding problem. And the longer you wait, the more it costs.

What Happens If You Fall Behind on Student Loans?

Student loans have a slower fuse, but the damage can be more severe in the long term.

If you miss:

90 days: Your loan is delinquent, and your lender reports it
270 days: Your loan defaults, and the full balance becomes due

The default leads to:

Wage garnishment
Tax refund seizure
Loss of repayment options
Lasting credit score damage

This is avoidable, but you need enough room in your budget to stay current. That starts with reducing your credit card burden.

What About Your Credit Score?

Both debts affect your credit, but in different ways.

Credit Cards:

High balances can negatively impact your credit utilization ratio.
Late payments appear fast.
Missed payments = long-term credit damage.

Student Loans:

Missed payments don’t show up until after 90 days.
Payment history that demonstrates long-term credit strength, provided you stay current.

Reducing your credit card balances can help improve your credit profile more quickly. This, in turn, improves your overall financial flexibility.

How Debt Relief Fits Into the Picture

If you’re making multiple payments to different credit cards every month—and still not making progress towards paying off the actual balance— debt relief can change your financial picture overnight.

At American Credit Card Solutions, our debt relief program helps:

Lower your total monthly credit card payments.
Combine multiple debts into one affordable payment.
Eliminate high-interest debt faster.

Once your credit card debt is under control, you can redirect money to paying off your student loans, avoid delinquency, and regain financial momentum.

No new loans. No credit score requirements. Just breathing room and a clear next step.

Is There Ever a Case for Paying Off Student Loans First?

Yes—but only in specific situations.

You might prioritize student loans if:

Your loans have higher interest rates than your credit cards.
You’re close to payoff.
You’re pursuing Public Service Loan Forgiveness.
Your credit card debt is minimal or paid off.

But for most people, credit card debt is the fire to put out first.

Latest Data to Consider

Credit card debt in the U.S.: $1.182 trillion (Q1 2025)
Average federal student loan debt: $39,075
Total student loan debt: $1.7 trillion
Average credit card interest rate: 21.91%
Number of student loan borrowers: 42.5 million

Credit cards typically incur higher fees for carrying them. Student loans offer more built-in relief.

Your 4-Step Action Plan

So, how do you get started on paying off your credit cards first? Here’s what you can do:

List your debts
This will help you track balances, interest rates, and monthly payments.
Calculate your interest costs
Identify which debt is more expensive to hold month-to-month.
Look at your flexibility
Can your student loans be deferred or lowered?
Act on what helps you now
Eliminate high-interest debt first. This will help you regain control of your budget.

Your Next Step: Request a Custom Debt Relief Plan

If your credit card bills are holding you back, now’s the time to make a change.

At American Credit Card Solutions, we’ll create a Custom Debt Relief Plan that’s tailored to your financial situation. You’ll see what’s possible—and what you could save.

Request My Custom Debt Relief Plan

No obligations
No new loan
No impact on your student loan status

Just a smarter way forward to better personal finance.